In a recommendation sent by Petroleum Ministry to the Finance Ministry on India, it has been recommended to levy additional excise duty on diesel cars in India in budget of year 2012-13 so as to reduce the demand for Diesel cars in India and this reduce the consumption of Diesel fuel in passenger cars. The step has been taken to reduce the financial burden on the Government which is bearing the subsidies on the Diesel fuel which is sold at subsidized price in Indian markets. If the recommendations are implemented, the Diesel cars my cost as much as Rs. 80,000 higher than their present prices (before budget of 2012-13) starting from coming financial year.

image- Diesel engine for illustration only

The additional excise duty will be used to recover the losses to the public sector oil companies which are facing losses because of under-recoveries. There is a lot of political pressure attached to the prices of Diesel in India as it’s a primary fuel for farming equipment as well as the road-transportation fuel in India which affects the commodity prices and inflation in India.

With the difference in technology and higher build construction required for a diesel engine compared to a petrol engine, the Diesel engine cars in India are already about Rs. 60,000 to Rs. 1,00,000 costlier than the same car with petrol engine. With additional excise duty (if implemented), the diesel cars will becomes between Rs. 1.4 Lakhs to Rs. 1.8 Lakhs more costly compared to petrol cars which have lower initial cost but higher running cost because of high petrol prices in India.

Many Indian automobile makers have been keeping their expansion plans on Diesel cars and Diesel engine plants on hold for the Budget of 2012-13 to go though. There maybe some game-changing announcements for Indian car makers in the upcoming Indian Union budget of 2012-13. We will keep a close eye on the same and will let you know all the details as soon as they arrive. For latest updates, sign up for our free email newsletter or like our official Facebook Page for updates.

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[…] demand bias for Diesel cars may get hugely impacted if the proposed additional duties of between Rs. 80,000 to Rs. 1,60,000 are implemented on Diesel cars … The budget is due for March 2012 and may change this equation of low cost of ownership for many […]